Oil shock and Iran war inflation fears push global bond yields to multi-year highs

The Iran conflict has triggered a sustained energy shock that is upending fixed-income markets and forcing a fundamental repricing of inflationThe rate at which prices rise across an economy. expectations across all major economies. Oil remains structurally elevated with the Strait of Hormuz effectively closed; the UAE is already building a bypass pipeline set to open by 2027, signaling long-term supply friction. This inflation persistence is now colliding with central bank guidanceCompany-issued forecasts of future financial performance., leaving bond investors with limited escape routes.

Global yields are rising sharply. US Treasuries, Japanese government bonds, and UK gilts all hit multi-year highs as investors shed durationBond price sensitivity to interest rate changes.. Japan's producer prices surged in April by the most since 2014 (12 years), backing the case for a Bank of Japan rate hike, while India raised petrol and diesel prices for the first time in four years. Sébastien Page, T. Rowe Price's CIO, flagged inflationThe rate at which prices rise across an economy. and Fed policy as on a collision course; RBC's Lori Calvasina warned that 5% Treasury yields would challenge equity bulls by depressing price-to-earnings ratios. BofA strategists flagged June as ripe for profit-taking on rising inflation risks.

Commodity markets are bifurcated but consistent: copper is retreating on the stronger dollar and inflationThe rate at which prices rise across an economy.-rate-hike expectations, while gold is declining (headed for weekly drop) as real yields rise and rate-hike bets increase. Energy importers face margin pressure (India's rupee under pressure, Pakistan sourcing LNG aggressively), while oil exporters are repositioning. Aramco is opening its natural gas facilities to Wall Street via an $11B lease, signaling confidence in long-term energy scarcity.

The equity risk is real. Broad breadth is already deteriorating; EM stocks fell most in a month as foreign investors rotated away. The setup resembles 2022's stagflation trap: rising energy costs, sticky inflationThe rate at which prices rise across an economy., and higher real rates all compress multiple expansion simultaneously. Central banks are trapped: can they tighten without breaking growth, or do they let inflation run and risk credibility loss.